Tips on Buying a Short Sale: The New Short Sale Fraud

Whilst scanning the web for tips on buying a short sale, I came across this little tidbit about a “new” short sale fraud:

Flopping is the opposite of flipping, another scam that was popular when housing prices were on the upswing. Agents and their lenders would over-value the property so the lender would loan more on it and then the overage was split between with the parties involved often including the seller. With flopping, the property is vastly under-valued so the bank takes less then the actual fair market value in agreeing to the short sale. The property is then later sold for it’s true value again with involved parties splitting the profits.

I am guessing that at least a third of the short sale listings in our neighborhood are suspicious. It is not unusual for a home to be listed at a ridiculously low price, as a short sale. The suspicious ones will not not allow showings and will not return phone calls. They are almost always listed by a “no name” broker. The home will enter escrow quickly and will close escrow at or even below that false low price.

Here’s the kicker, the homeowner who “lost” the home in this short sale never moves out. My guess is they “sell” the home to a trusted person, complete the sale and then the friend deeds the home back to the original party. This homeowner has now shaved off hundreds of thousands of dollars off their mortgage debt.

Now, why do I bring this up? After all, I have always said there is no controlling for evil. Here is the moral of our little story. If the price looks to good to be true, guess what? It is. Rather than getting all twisted up about how unfair it is, just move along to a legitimate deal. Opportunity is everywhere. Let’s go find some for you.

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I am Realtor who counsels wisely, negotiates fiercely and problem solves like a champ. I use my technology skills to make more money for my clients and I believe that cool people deserve a cool Realtor. You can find Kendyl on Google+. View all posts by Kendyl Young »

Information Deemed Reliable, but Not Guaranteed. The property information being provided is for consumers personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.